3.
THE LAW OF THE CUSTOMER
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
—ARTHUR SCHOPENHAUER1
In 1539, a Polish doctor, economist, mathematician, and part-time astronomer named Nicolaus Copernicus published a paper he had been working on for some years. The paper explained a strange idea: The earth revolves around the sun.2 His idea flew in the face of common sense. Everybody knew from direct evidence of their own eyes that the sun revolves around the earth. Each day, people from their motionless position on the firm solid earth saw the sun rise in the east, travel across the sky, and set in the west. It was obviously so. Copernicus was saying: “Forget common sense. Forget what your eyes are telling you. Forget what everyone believes. Common sense is wrong. The earth revolves around the sun.”
When Copernicus first presented his idea, it seemed to be no more than a different mathematical model for astronomers and astrologers—a simpler way of calculating the paths of the planets. At the time, his sun-centric view of the world did not offer more accurate predictions of planetary positions than the earth-centric mental model of the world. But his theory appealed to astronomers and astrologers as a simpler and clearer way of comprehending the heavens, as well as pointing to more fruitful hypotheses to explore.
Initially the powers-that-be were thrilled. When Pope Clement VII received an explanation of the theory in 1533 by his own secretary, Johann Widmannstetter, he was so pleased that he offered Copernicus a valuable gift.
What Pope Clement didn’t grasp was that the Copernican theory wasn’t just a mathematical model for calculating the movements of the planets. Embedded within it was a different worldview that implicitly undermined the plausibility of established religion in general, the Roman Catholic Church in particular, and the divine right of kings, on which most European governments based their claim to legitimacy.3
The publication of Copernicus’s theory thus began not just a rethinking of astronomy (Figure 3-1), but an inexorable process of inquiry into the entire organization of society, including the rights and privileges of the individuals who happened to be in charge of the Roman Catholic Church and of the monarchies that asserted power by divine right.
It became possible to ask what social value those presiding over these institutions were adding. While some of them continued to be seen as genuinely wise and courageous leaders, others were discovered to be petty tyrants, plodding bureaucrats, or incompetent nincompoops. By stripping these people and organizations of their cosmic legitimacy, the Copernican theory enabled their true social worth to be examined and recalibrated. Royalty and churches continued to exist, but they occupied a steadily diminishing role in the structure of society.
Figure 3-1. The Copernican revolution in astronomy.
In due course, the powers-that-be grasped the gravity of the challenge. In March 1616, almost eighty years after the publication of Copernicus’s thesis, the Roman Catholic Church issued a decree banning it until it could be corrected and forbidding the publication of any similar book. In 1633, the Italian astronomer Galileo Galilei was convicted of heresy for supporting the sun-centric view of the world and was placed under house arrest for the rest of his life.
But to no avail. The revolution that Copernicus had launched was under way. Resistance was futile, even though it continued for a long time. It wasn’t until several centuries later—1822, to be precise—that the Church finally conceded defeat and lifted the prohibition on discussion of the revolution in astronomy.
“To describe the innovation initiated by Copernicus as the simple interchange of the position of the earth and sun,” wrote Thomas Kuhn, “is to make a molehill out of a promontory in the development of human thought. If Copernicus’ proposal had had no consequences outside astronomy, it would have been neither so long delayed nor so strenuously resisted.”4
Under the Law of the Customer, the practice of management is currently undergoing an equivalent transformation in the way organizations understand, and interact with, the world. The earliest and simplest articulation of the law came from Peter Drucker in 1954: “There is only one valid definition of business purpose: to create a customer.”5
Drucker wrote, “It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance—especially not to the future of the business and to its success. What the customer thinks he is buying, what he considers ‘value,’ is decisive—it determines what a business is, what it produces and whether it will prosper.”6
Drucker’s proposition was a radical departure from the common sense of the day. Everyone knew that a business was in business to make money. It had been so since time immemorial. Any conversation with a businessman or economist confirmed that it was so. In fact, support for the view of money-making as the sole purpose of a business steadily gathered momentum in the latter part of the twentieth century, despite Drucker’s insight. In the 1970s and 1980s, it even hardened into a formal economic doctrine—namely, that the purpose of a firm is to maximize shareholder value as reflected in the current stock price. In the 1990s, it was cemented in place by stock compensation for the C-suite.7 As we will see in Chapter 8, despite the noxious short-termism generated by this doctrine, it became the dominant mantra of public companies, particularly in the United States, for the next several decades.
Meanwhile, changes in the marketplace since 1954 were steadily reinforcing the validity of Drucker’s insight and the embryonic Law of the Customer. Deregulation, globalization, the emergence of knowledge work, and new technology all made inroads. Competition increased. The pace of change accelerated. Knowledge workers became central to generating the innovation needed to create and retain customers. To top it off, the Internet transformed everything.
An epochal change in the commercial center of gravity thus occurred: Power in the marketplace shifted from seller to buyer. Instead of the firm being the stable center of the commercial universe, now the customer was the center. For firms to be successful, customers had to be not only satisfied, they had to be delighted. New technological capabilities meant that it became possible to deliver instant, intimate, frictionless value at scale. Once that became possible, as shown by firms such as Apple, Amazon, and Google, it also became necessary. In effect, instant, intimate, frictionless value at scale became the new standard of corporate performance that customers began first to expect and then to insist on. This is a fundamental reversal in most people’s understanding of how the world works. It means that firms have to be looking at, and interacting with, the world differently.
Instead of giant corporations standing as the solid center of the marketplace making money out of passive consumers who float by and are manipulated, the living customer with mercurial thoughts and feelings is now the center of the commercial universe. The customer is the sun, and organizations orbit around it. It’s a Copernican revolution in management (Figure 3-2).
By and large, the twentieth-century corporation had proceeded on the basis that it made certain products and services that customers could be induced, through marketing and sales campaigns, to purchase. A car company made cars. A computer company made computers. A clothing firm made clothing. A newspaper firm produced a newspaper. If the firm performed well, the customers bought more. If it performed less well, the customers bought less. The purpose of the firm was to make money. That was the way the world was. The world had always been this way. The mindset was in effect: “We make it and you take it!” It was common sense. It was obvious.
Figure 3-2. The Copernican revolution in management.
A world in which the customer is the center of the commercial universe is a very different place. Customers now have options and reliable information as to what those options are. Customers can communicate with each other and share experiences. With social media, those experiences can reach vast numbers of other customers. Now the firm can’t rely on telling customers to “take what we make.”
With customers in charge of the marketplace, a firm-centric mindset has significant risks. Now the firm has to think about what the customers’ problems are and try to figure out what might surprise and delight them by solving those problems. The firm needs to be looking at the world from the customer’s perspective and understanding to what extent the outcome of interacting with the firm will improve the customer’s life.
The shift implicit in the Law of the Customer, as Ranjay Gulati points out in Reorganize for Resilience, goes far beyond merely a fix to the existing management practices, such as upgrading the sales team or strengthening customer service.8 It means reorienting everything in the organization to meet a different goal. It means mobilizing employees and partners to deliver more value to customers sooner, and aligning all communications, decision making, systems, structures, values, and culture with this goal.
It is no longer enough for the firm to do its best for the customer within the constraints of its own internal systems and processes. Now, if customers are not being delighted, the firm needs to adjust those internal systems and processes to generate better customer outcomes. Slogans like “the customer is number one” are no longer slogans. They are the unforgiving reality of the post-Copernican marketplace. Now, the customer truly is number one. If internal systems, processes, goals, values, or culture are getting in the way of making that a reality, they must be changed. The customer—collectively—is now the boss.
This is a massive challenge, with dramatic implications for how organizations are run and how society gets things done. We see certain characteristics in firms that have achieved post-Copernican performance:
1. There is a shared goal of delighting the customer.
2. Top management takes responsibility for ensuring enthusiasm for delighting the customer throughout the organization.
3. The firm aspires to be the best at what it does.
4. Everyone in the organization has a clear line to the customer.
5. The firm ensures it has accurate and thorough knowledge of the customer.
6. Staff members are empowered to make decisions.
7. The firm’s structure changes with the marketplace.
8. Relationships are interactive, vertically, horizontally, internally, and externally.
9. Back-office functions are aligned to serve the customer.
10. Value for customers must be monetizable for the organization.
First, everyone in the organization is passionate about, and driven by, the goal of delighting customers. Everyone recognizes the performance requirement of instant, intimate, frictionless value at scale and understands how their work contributes to that performance. Thus, staff at firms like Riot Games, Spotify, and SRI International are thrilled to be creating and delivering cool products and services that delight customers. As Richard Sheridan at Menlo Innovations explains, employees experience joy in their work. Work becomes an energizing, ebullient, effervescent source of energy. Enthusiasm is restless, kinetic, and irrepressible. It is more than contentment: It leaps, bubbles, and overflows. It is contagious. It moves ideas forward and catalyzes action.9
These workplaces have a very different feel from pre-Copernican workplaces, where only one in five workers is fully engaged in their work and almost as many are actively undermining the firm’s goals.10 In post-Copernican workplaces, people come to work with a spring in their step. Work becomes, as Noël Coward suggested, more fun than fun.11
The task of delighting customers is thus the job of everyone. It requires the efforts of everyone in the corporation—and beyond—to share insights and figure out ways to handle a challenge that is much more difficult than merely delivering a product or service. Everyone does their best to get inside the minds and lives of end-users and intuit what could improve their lives, sometimes even before the end-users themselves know it. Since those doing the work are now typically skilled professionals and have access to information through interactions with users, colleagues, and the Internet, they often know more about how to meet the challenge than managers. Yet managers also have a key role to play.
Second, instilling enthusiasm for delighting customers throughout the organization is a key responsibility of top management. The top sets the tone for the organization. The C-suite thinks, feels, lives, and breathes customer delight. It makes clear, both inside and outside the firm, that the firm is not just in business to make money for its shareholders and senior executives. The senior managers evince their commitment to generating customer delight on a daily basis. It is the intensity of the top management’s passion for delighting customers that drives the firm’s ambition and the vastness of its goals, along with the dedication and attention to the minute details necessary to deliver on those goals. It is the audacity of the top management’s commitment to deliver customer delight, combined with a pragmatism to put it into action, that prompts awe, builds support, and drives action. It is in this way that the top management fulfills its responsibility to create both meaning at work and meaning in the work being done.12
The C-suite can’t perform this function by reciting a clever speech crafted by the PR department. It must come from the heart. A “numbers guy” with no particular interest or background in the firm’s products and services will have a hard time performing the top-management function in the post-Copernican organization. Faking passion won’t work. The staff immediately sees through a false front or a PR façade.
The Law of the Customer is a single message, delivered consistently, every day, all the time. Every utterance and every decision reflects the aspiration for the firm to be the best in the world at what it does—delighting customers by delivering instant, intimate, frictionless value.
The communications and actions of the entire C-suite in a post-Copernican firm reflect this reality. The C-suite can’t say one thing to staff, yet something different to customers, and then the opposite to Wall Street. The firm can’t have the CEO inspiring the staff to delight the customer and then have the chief financial officer eliminating work that is key to generating customer delight, all the time reassuring Wall Street that the firm is totally focused on maximizing shareholder value as reflected in the current stock price.
Consistency is key. A single statement from the top management to the staff that is inconsistent with the goal of delighting customers can spark a major setback. If repeated, there is a risk that the culture will go into a tailspin and begin regressing back to bureaucratic management.
In his book That Used to Be Us, Tom Friedman referred to this situation as “Carlson’s Law”:
Innovation that happens from the top down tends to be orderly but dumb. Innovation that happens from the bottom up tends to be chaotic but smart. This makes it all the more important for every worker to be a creative creator or creative server and for every boss to understand that the boss’s job is . . . to find ways to inspire, enable, and unleash innovation from the bottom up, and then to edit, manage, and merge that innovation from the top down to produce goods, services, and concepts.13
The actions and communications of the top management are part of an organic process that is both bottom-up and top-down. A principal role of the top is to identify and support champions throughout the organization. If the drive to delight customers comes from the CEO alone, or from the bottom alone, the firm is lost. At the same time, it is the top management that is responsible for remedying any systemic shortfalls or setbacks in delivering customer delight.
Third, the firm aspires to be the best in the world at what it does. There is no second place. To have a sustainable future, the firm recognizes that it must be world-class. In a global economy driven by the Internet, every business is potentially a global business, facing global competition that could come from anywhere in the world. It knows that customers expect the best, can find out what it is and who is delivering it, and thanks to the Web, can take steps to get it.
As a result, the firm does its utmost to recruit, nourish, and develop expertise that is the basis for being—and staying—the best. Outsourcing is both an opportunity and a trap. The firm may outsource aspects of its work where it’s not the best. Yet, as we shall see in Chapter 10, outsourcing poses risks: Outsourcing may save costs in the short term, but the firm may lose expertise that limits its capacity to compete in future.
Fourth, everyone in the organization has a clear line of sight to the ultimate customer or end-user, which enables everyone to see how their work is adding value to customers—or not. If not, they can ask: Why are we doing this work at all? This line of sight is supported and clarified by performance measures, particularly measures used by the financial function, which enables day-to-day decision making to reflect the goal, at every level of the organization.
Fifth, the firm ensures that there is accurate knowledge of customers’ context, goals, constraints, feelings, aspirations, and fears to be able to figure out what will delight them. As we saw at Menlo Innovations, anthropologists can be used to gather this understanding. Site visits and interactions with customers also add value. Recruiting customers as staff is a widespread phenomenon, as at Apple and Spotify. At Riot Games, being an enthusiastic gamer is almost a requirement of working there.
Yet firms also take care that staff members don’t impose their preferences on the customers. Thus, although Spotify tends to recruit music aficionados, it also makes efforts to track and understand customers’ preferences, which often differ markedly from the tastes of its own staff.
What’s more, these firms keep learning systematically. Significantly, of the thirteen public companies that have outperformed the S&P 500 five years in a row, including Facebook, Amazon, Google, and Salesforce, most of them are algorithmically driven. Like Spotify (which is not yet public), they are not only gathering data from their users but also systematically learning from that data to update and enhance the user experience. They are using multiple sensors and people to gather information about the current outcome of customers and almost automatically adjusting and upgrading their products and services on the fly from the information they have gathered.14
Spotify’s Discover Weekly is a good example. Depending on how you respond to the music playlist that Spotify sent you this week, next week’s playlist will be adjusted accordingly. It’s adjusted for you individually, as well as for each of the other more than 100 million Spotify users. Which is kind of amazing, and even a bit spooky.
The result is that brands are becoming less important than they used to be. (There’s only one consumer company in the top thirteen public companies.) Users are becoming less interested in the brand—what the firm did for them yesterday—and steadily more interested in what the firm is offering today. Through the Internet, they have the means to find that out and make their decisions accordingly.15
Sixth, staff members are empowered to make decisions to enable a better outcome for the customer. Decisions are pushed to the lowest possible level in the organization—preferably to the small teams that make up the workforce. These teams are not waiting around for decisions or approvals from the top. They get on with whatever is necessary to delight customers. As we will see in Chapter 4, the role of a senior manager changes from being a fierce, decision-taking commander to something more like a curator or gardener.
Seventh, the firm’s structure is a fluid and ever-changing network that reflects its customer focus in a rapidly changing marketplace. As the marketplace is constantly in flux, the organization itself is also constantly in flux. To ensure that outcomes for customers have primacy over internal unit preoccupations, the firm shies away from any static or permanent pyramidal structure. Any such structure will inevitably impose its own internal dynamic and preoccupations on the firm’s products and services, ahead of needed customer outcomes.
Thus, the Law of the Customer requires that the firm’s culture and internal systems, processes, and values themselves be continuously subordinated to, and driven by, delivering value to the customer: If there is a conflict, it is the customer’s needs that need to be given priority. Because of the clear line of sight to the ultimate customer, everyone can understand how the work contributes value to the customer and can take steps to make any necessary adjustments. Instead of frequent and massive “reorganizations” that periodically disrupt the supposedly permanent structure of a bureaucratic pyramid, there is constant adjustment and flux at all levels.
Eighth, relationships are interactive, both vertically and horizontally, and both inside and outside the organization. Customers and partners become part of the organization as active participants in creating value. With the push for continuous innovation, there is a recognition that ideas can come from anywhere. In the ensuing interactions, the boundaries between the organization and its context tend to dissolve (as shown in Figure 1-2 in Chapter 1).
Ninth, back-office functions, such as finance, budgeting, accounting, auditing, procurement, and people management, are aligned to reflect the primacy of the customer. Unlike a bureaucracy, where back-office functions take on a life of their own, the Law of the Customer requires that all internal systems and processes themselves be subordinated to, and driven by, delivering value to the customer. If there is a conflict, it is the outcome for the customer that is given priority. As with operations, all these back-office functions have a clear line of sight to the ultimate customer and continually adapt their systems and processes to enhance their contribution to the outcome for the ultimate customer. If the systems and processes aren’t so contributing, it becomes legitimate to ask: Why do these systems and processes exist at all?
Aligning the finance function with the Law of the Customer is a key priority. In public corporations, there is often a life-threatening struggle to liberate the firm from the pressures of rampaging short-termism from the stock market, as discussed in Chapters 8 to 10.
Recruitment of staff who share the goals, values, and attitudes of Agile management becomes a high priority to ensure that the customer-oriented culture is continuously strengthened, rather than undermined. Career development and compensation policies are adapted to reflect and support both the Law of the Small Team and the Law of the Customer. As an illustration of what the reconciliation of recruitment, training, and career development policies with Agile management at a large corporation looks like, the story of the Agile transformation at Cerner Corporation offers many insights (see Box 3-4).
Tenth, firms keep in mind that value for customers must in the end be monetizable for the organization. While committing to the primacy of the customer, the firm also recognizes that it must make money to survive. However, making money is the result, not the goal.
Happily, the Law of the Customer is well adapted to making money, with gains on both pricing and costs. On pricing, firms that delight their customers can have higher margins because the customers must have the products and services they love, and they are willing to queue up and pay extra for it.
Costs also tend to come down for several reasons. One is that firms stop doing things that customers don’t care about and so save money. Instead of doing what’s in some big plan, with items that the firm thinks customers want, the firm only does what customers actually want.
Another reason is that firms that delight their customers compete on time and get work done faster.16 When work gets done faster in the effort to delight customers, costs tend to come down of their own accord. “Capitalizing on time [is] a critical source of competitive advantage,” writes George Stalk. “Shortening the planning loop in the product development cycle, trimming process time in the factory, drastically reducing sales and distribution—managing time the way most companies manage costs, quality, or inventory. In fact, as a strategic weapon, time is the equivalent of money, productivity, quality, even innovation.”17
Yet another reason costs tend to come down concerns savings in sales and marketing. The firm that has delighted customers also has the advantage of an unpaid marketing department. Its customers are thrilled to sing its praises to friends and colleagues, so the firm can sit back and watch. And the firm doesn’t have to spend time and money dealing with disgruntled customers or counteracting negative social media blitzes. The firm does the right thing—delighting its customers—in the first place.
Taken as a whole, these elements add up to a revolution in management for most firms. As in astronomy, the Law of the Customer has thus begun not just technical adjustments to arcane management systems and processes, but also a wider inquiry into the way entire organizations are run, including the rights, privileges, and duties of the individuals who happen to oversee them.
As Thomas Kuhn might say, to describe the innovation initiated by the Law of the Customer as the simple interchange of the position of the customer and the shareholder would be to make a molehill out of a promontory in organizational thinking. As in the Copernican revolution in astronomy, if Agile management had no implications beyond the nitty-gritty of specific work processes, it would be neither so long delayed nor so strenuously resisted. Agile management begins with simple shifts in how work is done, but ends with questions such as: Which class of people will be running organizations? How much will they be compensated? How will the overall economy function and how will society as a whole get things done? In the end, it is about power.
As columnist Peggy Noonan wrote in the Wall Street Journal:
There is an arresting moment in Walter Isaacson’s biography of Steve Jobs, in which Jobs speaks at length about his philosophy of business. He’s at the end of his life and is summing things up. His mission, he says, was plain: to “build an enduring company where people were motivated to make great products.” Then he turned to the rise and fall of various businesses. He has a theory about “why decline happens” at great companies: “The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesman, because they’re the ones who can move the needle on revenues.” So salesmen are put in charge, and product engineers and designers feel demoted: Their efforts are no longer at the white-hot center of the company’s daily life. They “turn off.” IBM and Xerox, Jobs said, faltered in precisely this way. The salesmen who led the companies were smart and eloquent, but “they didn’t know anything about the product.” In the end this can doom a great company, because what consumers want is good products.18
And it’s not just the salesmen. It’s also the accountants and the money men who search the firm high and low to find ingenious ways to cut costs and extract value for shareholders.19 These activities dispirit the creators, the product engineers, and the designers, and they crimp the firm’s ability to add value to its customers. Yet because salespeople appear to be adding to the firm’s short-term profitability and share price, as a class they are currently celebrated and rewarded, even as they are systematically undermining the firm’s future.
Such firms are operating with pre-Copernican thinking and basically playing defense. The firm not only stops playing offense, it even forgets how to play offense, and the firm starts to die. If the firm is in a quasi-monopoly position, it may go on extracting value for extended periods of time. But basically, the firm is in a death spiral, as it dispirits those doing the work and frustrates its customers.
As managers playing solely defense find it steadily more difficult to make money, they tend to become more desperate and start doing ever more perilous things to extract value (as we will see in Chapters 8 to 11), like looting the firm’s pension fund,20 or cutting back on worker benefits,21 or outsourcing production to a foreign country in ways that further destroy the firm’s ability to innovate and compete.22 When many firms are operating in this way, we have a whole economy operating in what economists call “secular economic stagnation.” Inequality increases and the political and social fabric starts to unravel.23
Why do managers keep on a path that is out of sync with the VUCA marketplace and that is systematically killing their firms? For one thing, it’s more difficult to create value than to extract value. For another, executives have found ways to reward themselves lavishly for extracting value. As Upton Sinclair noted long ago, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”24
It’s also the case that genuine paradigm shifts, by their very nature, are always resisted. And let’s be clear. We are talking about a paradigm shift in the strict sense as laid down by Thomas Kuhn: a different mental model of the world. The changes involved here go far beyond those business articles in which the term “paradigm shift” has been applied to some tweak to the existing managerial canon, such as a new negotiating tactic or a different HR practice. In that degraded sense, “paradigm shifts in management” have been claimed so frequently and inappropriately over the last half century in management writing that the very term is a standing management joke. Management writers have cried wolf so often that now, when a real wolf comes along, it is hard to recognize it as a wolf.
As it happens, the parallelism of paradigm shifts in science and management is striking, as we can see from Thomas Kuhn’s pathbreaking book The Structure of Scientific Revolutions (which is summarized in Box 3-1).25
In the nineteenth century, management was in a pre-paradigm phase, in which there was no consensus on any consistent theory of management. Management thinking entered the second phase with the work of Frederick Taylor and his principles of “scientific management” in 1911, which began with the ominously prescient declaration: “In the past, Man has been first. In future, the system must be first.”26
Despite many changes and evolutions, the system that Taylor initiated has several underlying assumptions that are still “obvious” to many managers and theorists today. They include running the organization through top-down command and control. The top knows best. Bureaucracy is the only way to run an efficient organization on a large scale. A corporation can manipulate customers to buy its products and services. The overriding objective of the firm is to make money for shareholders with ever-greater predictability and efficiency through economies of scale.
For the next hundred years or so, these assumptions, and the systems, values, and corporate cultures that are built on them, have remained the default mental model of management. As in science, most managers and theorists have spent their entire careers accepting the prevailing paradigm and proceeding in a puzzle-solving mode within these assumptions.
Yet over the last half century, many unresolved anomalies have emerged. There is the need to cope with a much faster pace of change, including unexpected developments in technology and the shift in power from seller to buyer. There is the need for continuous innovation, not just exploiting the existing business. There is the need to cope with the mercurial whims and wishes of customers who now have a decisive say in the future of the organization. There is the need to respond to the accelerating disruption of the existing business by upstarts that are moving faster and more responsively to meet the needs of customers, sometimes coming from other sectors. There is the need for more attention to motivation and the human dimension of work, particularly through teams and collaboration, in a marketplace where innovation is central. And so on.
Throughout the twentieth century, these “anomalies” were dealt with by grafting fixes onto the prevailing mental model of management without basically changing it. Firms tightened management control. They downsized. They reorganized. They delayered. They empowered their staff. They reengineered processes. They expanded sales and marketing campaigns. They acquired new companies. They shed businesses that weren’t doing well. These fixes sometimes led to short-term gains, but they didn’t solve the underlying problem.
In retrospect, the reasons are obvious. How could the firm be nimbler when decisions needed approvals up a steep chain of command? How could the firm pursue innovation when all its systems and processes were devoted to preserving the status quo and extracting the gains from efficiency? How could the firm encourage creativity and collaboration when the basic structure of work involved having bosses tell individuals what to do? How could trust and transparency be achieved when the vertical chains of command of a bureaucracy inherently fostered nontransparency? How could the firm innovate with a dispirited, even disruptive, workforce?
In practice, managers lurched backward and forward, one moment paying more attention to resolving the anomalies and then reverting back to the dominant mental model, particularly when it became apparent that attending to the anomalies endangered short-term returns to shareholders or put in question the managers’ control.
Another aspect that delays paradigm shifts is when they come from the “wrong people.”
Thus in 1714, the British government offered a prize for a method of determining longitude at sea, with an award of £20,000 (£3 million in today’s terms). John Harrison, a Yorkshire carpenter, worked on the project for several decades and eventually, in 1761, came up with a design that proved accurate on a long voyage to Jamaica. The scientific establishment refused to believe that a Yorkshire carpenter could possibly have solved the problem that had stumped the best scientific minds. Some twelve years later in 1773, when Harrison was eighty years old, he received a monetary award in the amount of £8,750 from Parliament for his achievements, but he never received the actual prize. A Yorkshire carpenter was the wrong person to have solved the problem.
In 1865, an unknown professor named Gregor Mendel read a paper at two meetings of the Natural History Society of Brünn in Moravia, giving the results of studies in which he had cultivated and tested some 29,000 pea plants. His study presented a solution to a problem that had stumped the finest scientific minds. The paper was ignored by the international scientific community for the succeeding thirty-five years until it was eventually realized that Mendel had indeed come up with the solution. His work later became known as Mendel’s Laws of Inheritance and he was hailed as the father of modern genetics. His work was ignored for decades by the scientific community because a researcher on peas in Moravia was the wrong person to have solved the problem.
In 1981, Barry Marshall, a pathologist in Perth, Australia, came up with an odd idea: Stomach ulcers are caused by the presence of spiral bacteria. His idea was at odds with the thinking of the international scientific community. It was ridiculed by the medical establishment. How could bacteria possibly live in the acidic environment of the stomach? In 1984, frustrated by the widespread disrespect for his ideas, Marshall drank a Petri dish of liquid containing the spiral bacteria, expecting to develop, perhaps years later, an ulcer. He was surprised when, only three days later, he developed ulcer symptoms. But it took two more decades before he was awarded the Nobel Prize for Medicine. An obscure pathologist from Perth was the wrong person to have solved the problem.
Over and over again, we see that when a bold new idea challenges an entire way of thinking of the establishment, if the idea comes from an unexpected source, it can languish in obscurity for decades, even though the solution to a problem that needs to be solved is staring the experts in the face.
Something similar is occurring now in management. Over the last decade, the Law of the Small Team and the Law of the Customer have been field-tested in thousands of organizations around the world. Unfortunately, these management discoveries weren’t made by “the right people”—academics in suits and ties at business schools or high-paid consultants. The discoveries were made by the people you might think are the least likely people to have solved a management problem: geeks. Software developers were known to be antipathetic to both managers and management. Often badly dressed and disrespectful, they were often seen as the most problematic of a big organization’s employees. It was preposterous to think that innovation in management could come from such people.
Yet in retrospect, it’s not hard to see why software developers would be the ones to solve the problem. In the 1990s, huge sums of money were being lost because the work of software development was always late, over budget, and plagued by quality problems. Clients were upset, and firms lost money. Developers were seen as culprits and were punished. They worked harder and harder. They labored evenings and weekends. It made no difference. The software was still late, over budget, and full of bugs. They were fired, but their replacements did no better. The standard prescriptions of management didn’t work with software development. It was frustrating for managers to find that the more they tried to control things, the less progress they made. Complexity responded to competence, not authority. Something different had to be found.
Making the shift to the new paradigm isn’t easy. It’s one thing to accept intellectually that adding value to customers is the purpose of an organization. It’s another to take the goals, systems, processes, structures, values, habits, attitudes, and culture of an entire bureaucracy and turn that intellectual principle into a reality.
Given the deep change involved, moving from the pre-Copernican to the post-Copernican world of management doesn’t happen overnight. When there are only a few teams, the organization might learn to operate routinely in this way within a year. When there are many teams, managing dependencies between the teams becomes more of a challenge and it may take several years. With a large organization, it will take many years for these principles to become second nature to the organization. There are many new behaviors, attitudes, and assumptions to learn and internalize so that they become “the way we do things around here.” There are also many processes in people management, budgeting, accounting, and auditing that will also need to be aligned with the new way of working.
The full gains from post-Copernican management come when the whole organization is operating under the Law of the Small Team and the Law of the Customer. How is this possible? It is to this set of issues that we turn in the next chapter with the Law of the Network.
PARADIGM SHIFTS IN SCIENCE
The parallelism of paradigm shifts in science and management is exact. Let’s refresh our memories of Thomas Kuhn’s The Structure of Scientific Revolutions and remind ourselves: What is a paradigm shift in science?
In 1962, Kuhn’s book challenged the prevailing view of progress in science. Until then, progress in science was seen primarily as the steady accretion of new facts and relationships, one on top of the other. Kuhn accepted that science experiences long periods of conceptual continuity and accretion. This is what he calls “normal science.” However, it is punctuated by periods of “revolutionary science,” with abrupt discontinuities as the mental model changes in fundamental ways. There are three distinct phases.
The first phase is the pre-paradigm phase, in which there is no consensus on any particular theory. There may be several incompatible or incomplete theories.
The second phase occurs when a number of puzzles can be solved within a single mental framework or paradigm. This then becomes the dominant framework. Scientists gravitate to the new framework and normal science begins. Thereafter, scientists try to solve puzzles within the assumptions of the dominant paradigm. Most scientists spend their entire careers accepting the prevailing framework and proceeding in a puzzle-solving mode within its basic assumptions. It becomes unthinkable to view the world in any other way.
As time goes on, however, anomalies appear that cannot easily be resolved within the dominant framework of assumptions. Yet paradoxically, puzzle-solving within the framework continues with even greater tenacity, because prior successes lead people to believe that resolving the anomalies within the existing framework must be possible, even though solutions are hard to find. Anomalies thus accumulate as the dominant paradigm is stretched and bent and adjusted in an increasingly desperate effort to accommodate them, yet with only partial success.
The third phase occurs when some scientists finally accept that the dominant framework can’t resolve the anomalies. These scientists come to see that the basic framework can’t be repaired. It must be replaced. They start exploring alternatives to long-held, seemingly obvious, self-evident assumptions.
And thus, revolutionary science begins. These scientists develop a new conceptual framework that they believe presents a better way of reconciling the known facts with the anomalies. At first, the new framework itself has various gaps and contradictions, because it is incomplete and needs further thought.
When first presented, the new framework is greeted with hostility and derision from the establishment—people whose careers and lives have been based on the nurturing of the existing paradigm. The inevitable gaps and flaws in the new framework are cited as reasons for not adopting it. Consequently, paradigm shifts do not occur quickly or easily.
There follows a period in which the adherents of different frameworks pursue their different theories. The powers-that-be attack the revolutionary framework for being theoretically unsound, incomplete, and irresponsible, while the revolutionaries point to the growing list of unresolved anomalies of the still-dominant paradigm.
In time, the gaps in the new framework are filled and the new framework is integrated and completed. Other scientists then converge on it as a more productive way of understanding how the world works. Once most scientists agree that the new framework should replace the old one, a paradigm shift has occurred, even though many individuals may remain intransigent and continue to think and teach in the old way.
As scientists look at the world in the new way, the direction of future scientific research in the field shifts. New questions are asked of old data. In due course, textbooks are rewritten and university courses are revised.
The period of conflict between frameworks may last for decades, particularly if the new paradigm comes not from some of the existing leaders of the current scientific establishment, but rather from some unexpected and peripheral source.
ULTIMATE CUSTOMERS, INTERNAL CUSTOMERS, AND END-USERS
In this chapter, I use the word “customer” and “user” as synonyms. That reflects the simplest case in which the ultimate customer is also the end-user, such as when someone buys an iPhone. (See Figure 3-3.)
Figure 3-3. The end-user is the customer.
In some situations, the producer may be providing products or services to an internal customer who in due course becomes a producer for the ultimate customer. (See Figure 3-4.) In bureaucracies, the needs of the internal customer are often disconnected from the needs of the ultimate customer, resulting in waste. Under the Law of the Customer, the original producers not only meet the needs of the internal customers, they have a clear line of sight as to what value is being provided for the ultimate customer.
Figure 3-4. Internal and ultimate customers.
There are also situations where the end-user and the customer are different. Those using the Google Search capability—the end-users—get it for free. The paying customers are the advertisers: Google must satisfy both customers and end-users (see Figure 3-5).
Figure 3-5. The end-user and the customer are different.
PRACTICES OF THE LAW OF THE CUSTOMER
For firms that have truly made the shift to the customer-driven mindset, here are some of the practices that tend to emerge.
1. Target. Identify your core market of primary customers. Delighting this group is important so that you have a resilient customer base. Trying to satisfy everyone at the outset practically guarantees average products and services that will not delight anyone. Careful choices need to be made in terms of where to put one’s efforts.
Figure 3-6. The four choices of customer focus.
The bottom-left quadrant in Figure 3-6—doing what the firm has always done—was once the safest place. Now by itself, it has become the most dangerous—preserving the status quo at the very time that your customers are likely to be thinking about new options being offered by competitors.
The bottom-right quadrant—incremental innovation by cost reduction or quality improvements—is necessary. It’s the price of survival. But it may not be enough by itself to generate major new revenue gains.
Huge new profits will generally have to come by moving into the top-left quadrant (new markets for existing products and services) or the top-right quadrant (generating new products and services that create new markets). We’ll come back to the top-right quadrant in Chapters 6 and 7 as it requires a whole new level of agility: going beyond operational Agility to Strategic Agility.
2. Constantly experiment. “In this environment,” says management consultant Paul Nunes, “you are better off to experiment constantly and in the market, learning and sensing, and creating a wealth of options, rather than trying to determine ‘best’ a priori, at least so long as you can afford to do that. In industries like software, where the cost of experimentation and revision is low, that is truer than some others. Sites like Kickstarter have demonstrated how you can experiment with offers of all sorts of products that you haven’t even created. That’s why we say market experimentation is necessary. That doesn’t mean, however, you don’t have to have a strategy, or can’t win with a single shot. By learning from the experiments of others, and timing cost trends perfectly, you can create a Big Bang Disruption like Kindle. So, there are different ways of discovering and creating the learnings of experimentation, and of creating social consensus.”1
3. Partner with startups. Don’t try to do everything yourself. There may be some parts of the firm’s DNA that get in the way of what the firm needs to do. Take, for instance, videos on The New Yorker website. The writing in that magazine is superb—arguably the very best in the world today. But their videos? Not just bad: deplorable. It seems that The New Yorker as an organization has a blind spot for video. They should accept that reality and partner with a startup that has video in its DNA.
But don’t just bolt the startup onto the bureaucracy. Embrace the startup way of operating for the whole firm.
4. Increase product malleability. To the extent possible, shift from hardware to software so that the product can be easily upgraded and customized. But also recognize that “going digital” is not by itself the answer. Merely turning a physical product into a digital product will achieve nothing unless it is accompanied by a shift in mindset to see things from the customers’ perspective and generate better outcomes.
5. Focus. Aim for the simplest possible thing that will delight buyers. Don’t load products down with features that most people won’t use and that make the product hard to operate. For instance, my DVD controller made by Sony has fifty-four buttons, most of which no one in our house knows how to use: It delights no one. By contrast, my iPod made by Apple has just four buttons and delights everyone.
6. Innovate in short stages. Launch the product or service with the key features that primary clients want, and then add selectively through upgrades. Apple’s iPhone initially lacked many features of existing smartphones, but it delighted its core group of customers—young users who wanted a cool mobile phone; the other features were added later.
7. Evaluate. Don’t just add features. Following every customer suggestion can lead to a client-driven death spiral. As more and more customer requests are met and features are added, the product can become unlovable or even unusable. Make sure that each upgrade really does delight.
8. Be willing to disappoint. Know who you want to delight. Southwest Airlines does not offer hot meals. Amazon does not delight book authors, publishers, or brick-and-mortar retail product sellers.
9. Deliver value faster. It must be as close to instant as possible. For customers, time is often the most valuable resource. In a bureaucracy, time is constantly wasted, as work sits in queues, awaiting management approvals. Use value stream mapping to eliminate such delays.
10. Customize. Today’s performance criteria include personalized products and services. Thus Harley-Davidson isn’t merely building reliable motorcycles. It aims to fulfill the dreams of its customers through the motorcycle experience. If that means going beyond the signature full-throated roar of their Harley and enabling Harley owners to embellish their vehicles with grassroots folk art, the company will help them do it.
NOTE
1. P. Nunes, quoted in S. Denning, “The Business Disease Without a Cure: Big-Bang Disruption,” Forbes.com, February 22, 2014, https://www.forbes.com/sites/stevedenning/2014/02/22/the-business-disease-without-a-cure-big-bang-disruption/.
ALIGNING PEOPLE MANAGEMENT WITH AGILE MANAGEMENT AT CERNER
A firm that has made considerable progress in creating a network culture is Cerner Corporation, the medical software firm, headquartered in Kansas City, Missouri, with around 25,000 employees and growing rapidly. Its Agile transformation began in 2008 when a massive effort was made to imbue the existing staff with the Law of the Small Team and the Law of the Customer.
With rapid growth, Cerner has a constant influx of new staff who do not necessarily arrive at Cerner with an Agile mindset. How does Cerner go about sustaining the elements of an Agile culture in a situation of constant flux? How does that work in the highly regulated health sector, where the risk of failure is a matter of life and death? How does Cerner inculcate and sustain a spirit of autonomy and innovation with reliability?
After Cerner had launched its Agile transformation, the firm found it wasn’t easy to recruit people who could operate reliably in an Agile fashion, producing quality code, troubleshooting problems quickly and accurately, using automated testing, and seeing things from the end-user’s perspective. It shouldn’t have been surprising that new recruits weren’t skilled in those areas because the colleges they recruited from weren’t teaching those things.
Enter Michelle Brush, an executive within the Population Health business at Cerner. Her primary duties include developing solutions that identify those who are at risk for high-cost, low-quality-of-life blood conditions like diabetes or heart failure. Identification then leads to recommending interventions to be taken before patients get to the point that they need something serious like a foot amputation for diabetics. The goal is to catch problems through analytics and intelligence before it is too late. This results in improved health of the individual and significant reduced cost to the health care system.
Brush has an additional passion: improving the Agile culture at Cerner and nurturing it from the day an engineer first learns of Cerner. Under this umbrella, she has been responsible for the redesign of the engineering training and onboarding programs at Cerner.
The Problems with Training at Cerner
Prior to adopting an Agile development model, Cerner’s engineering training focused on Cerner-specific technology and how Cerner interprets the health care domain. It was a four-week and a one-size-fits-all program. There were some assessments, including written tests followed by feedback. Yet Brush discovered that Cerner’s managers were not seeing the desired behaviors after participants left the training program. So she set out to redesign the program with an Agile mindset and made it her personal challenge to solve.
These days, Brush talks as an executive. But she grew up through the ranks. Most of the associates who are involved in culture at the executive level now have that same story. They got involved at the very bottom, as individual contributors, and started proposing ideas. They got support from the leadership to drive those ideas and then they were rewarded and recognized for the changes they had made in Cerner’s work environment. Now they have become executive champions. Her small team is always seeking out the next layer of associates who can come up and drive the culture forward.
In rethinking the concept of training, Brush found that Cerner was hiring associates who didn’t really know how to do their work in an Agile fashion. That may sound surprising since there was already an elaborate interview process in place. And yet there were new associates who hardly knew how to start. This represented a small but significant percentage of new hires.
It was very expensive to give those associates four weeks of training, put them on a team, have the team work with them for six months, and then have the team come back and say, “We’re sorry but it’s not working. We can’t coach them through this. They’re not going to be a fit with Cerner.”
Realizing that, Brush started to rethink the whole concept of training. She met with some sixty managers across Cerner, making sure to get the full diversity of opinions, experience, and roles. She asked what their principal challenges were working with candidates coming out of college. She built a list of all their concerns and the common patterns.
She found that the training program was built around teaching the Cerner way of doing things, the Cerner domain, and health care problems. However, the managers didn’t care about that in respect of these recruits. What the managers wanted was something more practical. They wanted staff who knew how to troubleshoot, how to do automated testing, and how to talk to solution designers and ask the right questions to clarify user requirements. They wanted employees who were, in effect, living the Law of the Customer and the Law of the Small Team. There were too many new recruits who either thought you wrote code and just threw it over the wall or, at the other extreme, thought you had to fully document everything even before you started the project.
The Dev Academy
Brush realized that what was missing was behaviors. Cerner had to rethink what was meant by learning. The training program had been based on transferring knowledge. Instead, Cerner needed to focus on encouraging the right behaviors. Knowledge was not enough. Knowledge was just a means to getting the wanted behaviors.
Brush developed an inventory of the core behaviors that candidates weren’t exhibiting and that were needed. She went through the data and threw out almost all the old training program. She took an Agile approach to developing the new program. They would roll out one new thing a week and get feedback. They would either keep it, tweak it, or throw it away. They did that over the course of six months until they finally had the kind of training program they wanted, which became known as the Dev Academy.
It begins with what is called “Dev Essentials”: a fixed two-week program that introduces the wanted behaviors. This training includes DevOps, unit testing, Agile development, and some basic and general technical skills that everyone needs to have. Thus, everyone should know how to interact with the data store and what web development should look like.
Then the trainees receive a hands-on assessment. They are told which areas they need to work on that are essential to being an effective engineer at Cerner. It is very much like a classroom or college environment. They are teaching associates things that they might not have covered in college.
The Dev Center
After associates have completed the Dev Essentials, they are brought into the Dev Center and asked to pick a project. They receive a list of some forty real projects that are available at the time. They rank their preferences. There is a matching algorithm that helps put them into tiny teams of two or three.
The projects are real projects that Cerner needs to do anyway, although they are low-priority, low-risk projects. Cerner doesn’t want the trainees touching clinical software. Clinical software is high risk: Cerner doesn’t put that in production with brand-new associates. Instead, they are given projects like working on tools to facilitate troubleshooting or testing. All of the projects have business value, but they are very low risk.
Mentors help with the design decisions and with code. They give feedback and talk to the trainees about communication skills and what is expected from them in terms of quality. They spend about four hours a week being a mentor.
To supplement that mentorship, there are a handful of full-time staff at the Dev Center. These individuals are typically up-and-coming leaders in the company who help run the Dev Center for an eighteen- to twenty-four-month rotation. The result is that they come out of the Dev Center with a leadership position and essentially get to pick where they want to go.
In the Dev Center, the trainees pick their project, work on it, and get feedback. The mentors are required to say every week how the trainees are doing. The mentors fill out a very lightweight survey in which they are asked to look at fixed key performance areas. They are given guidelines on how to score in each area.
“We don’t give [trainees] grades like A, B, or C,” says Brush, “since people just out of school tend to freak out about grades. If a trainee receives a C, they are devastated. But if they receive a minus, they feel, ‘Oh, I just need to improve a bit.’ We need to get their thinking about grades out of their system.”
Trainees get this feedback from the mentors weekly. They are told, “These are the areas for improvement.” It might be more attention to quality or to unit-test coverage. The mentors monitor the trainees’ performance weekly and hope to see the minuses turn into pluses or plus-pluses. It is entirely performance-based. When all of their ratings are pluses, they are assigned to a team—not before, and not later.
“This is different from the old program, which was very much fixed,” says Brush. “It didn’t matter how good or bad you were; you stayed exactly four weeks before you went to a team. Now a trainee can get out in two weeks or can be there for twelve weeks. It depends on what they need. It is run as a safe place. Associates aren’t punished for taking twelve weeks. If they meet competency, they meet competency. They are going to do well at Cerner.”
If the staff see signs that are concerning—for instance, that the trainees are lacking aptitude, or if they have been working for twelve weeks on one thing and they just can’t get it, or where there is an inability to take feedback—then something more is needed. These associates are let go and they never impact a working team. “These days, not many associates are let go,” says Brush, “which speaks to improvements that we have also made in the interview process.”
The Dev Academy program is heavily documented, heavily audited, and heavily monitored. Everything is transparent and visible to everyone. Everyone can see who is in the Dev Center, what they are working on, and who their mentors are, although the performance reviews themselves remain private.
Improvements to Recruitment
When the program was reviewed after the first year, there was an issue whether to adjust the training program or make adjustments to hiring. Although there were some adjustments made to the training, they ended up making more adjustments to recruitment.
“That’s because when we looked at the data,” says Brush, “we saw a clear correlation between how Cerner hired and who the interviewer was, and how associates performed in the program. Based on the data, we launched an initiative to evaluate the hiring practices against research findings in psychology, which suggested once again a sharper focus on behaviors. It turned out that the interview process at the time was focused mainly on knowledge.”
What candidates had done was seen to be a better predictor of what they would do in future than what they say they will do. So, Cerner decided to focus on behavior and refocused the questions on things like: “Tell me about projects you have worked on. Tell me about the most difficult bug you ever had to troubleshoot. How did you track it down? What was the problem? How did you fix it?”
The intent was to make it as much as possible an interesting conversation between the interviewer and the interviewee, rather than a quiz. It was like: “Let’s talk about this! Let’s go to the whiteboard together and discuss! Let’s draw this out.”
The candidate would be given situational questions to complement the behavioral questions. They would be given problems that were like real Cerner problems. For example: “Hey, we’ve got people coming into a hospital and we need to know who they are and where they live and what gender they are. Can you write me a data structure to gather that information?” They would critique the candidate in the process and make suggestions, like: “Why is that a string and not an object?” They are poking at the candidate’s work as they are doing it. The purpose is to see how they respond to feedback, more than whether they have the right answer to the question.
As the interview goes on, the interviewers make the problem increasingly challenging until they get to the point where candidates are no longer able to respond to the problem. The interviewers don’t hold the interviewees accountable for the point where they end. They are more interested in seeing how they respond to questions and whether they are able to incorporate new information as they talk through a problem. Are they able to rework their previous design to account for the new requirement that has just been introduced? The interview is meant to feel like two people sitting in front of a whiteboard, talking through ideas in a process of mutual discovery.
Cerner now has a standard interview packet with a pool of questions that the interviewer can pick. They don’t have to ask all the questions. They ask them until they feel they have figured out the behaviors and the culture that they want. But they can’t go outside the packet. Cerner insists on that because of evidence that consistent rubrics beat personal opinions every time. That’s because people have unconscious biases. When interviewers say people “are not a good fit,” what they generally mean is, “They are not right for me.” To deal with this, Cerner insists on consistent rubrics and consistent approaches to interviewing.
For each question, the behaviors that the interviewer has to gauge are indicated. “What’s their attention to detail? How do they handle and respond to feedback? How do they approach design?” What a good candidate, or an intermediate candidate, should have demonstrated by the end of the discussion of the question is also indicated. For each question, the interviewer circles the performance rating and this becomes the basis for discussion in the debriefing session.
Cerner is interested in engineering mobility. It is more important to know whether candidates will be able to learn software languages like Java or Ruby rather than whether they already know Java or Ruby. Technology changes so quickly, Cerner is constantly adapting. Cerner cares less about knowledge and more about the ability to incorporate new ideas, new thoughts, and new technology.
Cerner uses a pool of interviewers. They are not allowed to interview until they have gone through an interviewer training process. The recruiting organization regularly evaluates the quality of its interviewers, including how many interviewees accept offers and how their candidates work out over time. Cerner is frequently removing interviewers from the pool, based on the results and the feedback received. (For a time, Cerner tried getting away from the pool concept, but ended up going back to it. In the end, it is a matter of ensuring that there is an adequate inflow of good candidates.)
The focus is initially on “culture fit.” The question of “team fit” comes in when the manager meets the applicant at the end of the process. A manager might say, “No one here fits my need.” That means that the manager is opting to wait two weeks and get someone from the next batch. So, the culture fit is the basis of the decision to hire candidates into the pool. “Team fit” doesn’t figure in the hiring decision and is less of a concern because Cerner doesn’t emphasize keeping teams together for long periods anyway. It’s more important that candidates can work on multiple teams.
Open Source
One thing that came out of the culture work at Cerner was a decision to enhance understanding of Cerner’s place in the open-source community. While Cerner already used open-source methods, a review showed that Cerner was consuming more than contributing, let alone creating. Cerner recognized that as a creator of open-source code it needed to be creating code repositories all the time.
Cerner decided to take steps to get associates to understand the importance of open source. An outside speaker was brought in to help associates understand that contributing to open source is a competitive advantage for Cerner. By putting code out there for other firms to use, Cerner gets to define where the industry should go for that specific technology.
For instance, Cerner is now working on how to do streaming in big data sets. It’s something that the industry hasn’t yet solved. So the conversations have been about how to build something for Cerner that could solve the problem. Cerner wants to make it open source because it doesn’t want to build something proprietary and then two years from now discover that the industry has come up with a different solution in open source and be forced to shift all its work to a solution that has become the industry standard. If Cerner is going to build something, it wants its product to become the industry standard. Or if there is something already out there in open source, Cerner wants to consume that and contribute to it. Cerner needs to throw its weight behind the solution that it believes is going to be the winning approach across the open-source industry.
Now Cerner is pushing associates to contribute to open source as much as they can, either through bug fixes or by drawing on open-source code in areas that are not Cerner’s core competence. Cerner has also become an Apache Software Foundation sponsor and an organizational member of the public GitHub. When associates do contribute to open source, they are celebrated in town hall meetings or are otherwise acknowledged.